The Wheel of Outcomes

If you’re considering making some change in your life — waking up at a different time, adopting a pet, starting a business — there are generally only two possibilities for the outcome: it will make your life better, or it will make your life worse. (Very rarely, it might make a net zero difference, but I won’t worry about that.)

But if the change affects someone else too, there’s more to consider, and more possible outcomes: Does it make both parties better off? Is it a win/lose situation? Lose/lose? Moreover, it usually doesn’t affect both of you equally: who gains or loses more? If one person wins and another loses, does the win outweigh the loss? If it’s win/win or lose/lose, do the two parties end up more equal, or more unequal than they started?

I’ve often heard economic arguments that go something like “This practice is good because it increases our country’s GDP,” i.e. it increases a measure of our total well-being, and social arguments that go “This same practice is bad because it increases inequality,” i.e. it increases differences in well-being between groups. But when you’re looking at two or more groups, it doesn’t make sense to say that something is just plain “good” or “bad”, because it may be good or bad separately and in different amounts for each group.

It turns out for two groups, there are eight different ways they could both be affected, which I arrange into this pie-chart-looking diagram I call “The Wheel of Outcomes”:

Of course, in real life there are usually more than two people or groups who have a stake in some decision, but I still find it enormously helpful to have a mental picture for organizing my thoughts on what kinds of tradeoffs and compromises I find acceptable, and what values seem to be at odds (like maximizing the total vs. minimizing inequality) that can actually work together. I’ll walk you through the eight pie slices, with real-life examples of each.

First we’ll work our way down the right-hand side of the wheel:

1. Utopia

That golden pie slice in the upper right consists of those changes that benefit both groups, but especially the group that was less well off to start with. This type of outcome is win/win and decreases inequality at the same time. Examples include:

  • Public libraries
  • Curb cuts in sidewalks (helpful for people with strollers and carts, but especially people with wheelchairs)
  • Wikipedia
  • Public infrastructure in general

2. Investment

The orange pie slice consists of win/win scenarios in which the one who was better off already gains the most, increasing inequality. Most innovations that are good for everyone fall into this category, since those with more resources are more able to take advantage of new opportunities. Examples include:

  • The widespread adoption of Google’s digital infrastructure (good for everyone, but especially for Google)
  • Merit-based hiring, which means people with the most experience continue to get more, while people with none have a hard time getting any.

3. Monopoly

The red slice represents those outcomes in which those on top get large gains through small losses of those on bottom. The classic example is when a large company becomes a monopoly and starts raising prices or treating its workers badly, all in the name of increased productivity and profit.

  • Amazon provides a huge service for many households, but it brings those cost-savings at the expense of terrible worker conditions.
  • Social media add a tremendous value to the world, but it comes with some uncomfortable side-effects for its regular users and large profits for its owners.

4. Exploitation

Even worse is when the rich prosper at the expense of the poor, and it’s not even a net positive.

  • Think of dictators who keep their countries poor by siphoning all the nation’s wealth into their own bank accounts.
  • In some ways, the pandemic has ended up in this slice, since while the economy as a whole has suffered, the richest few have used it to get even richer.

Now we’ll skip back up to the upper-left and work our way down the left-hand side:

5. Safety net

The diametric opposite of exploitation is a social safety net: anything that diverts resources to those who most benefit from them. This has the simultaneous effect of decreasing inequality and improving total well-being, but unlike Utopian interventions it’s not a positive for everyone.

  • Unemployment insurance benefits those down on their luck at the expense of those already doing fine, but it’s a net positive for society because those benefits are much more valuable to those who receive them than to those who have to give them up.
  • Other social programs like “House the homeless” benefit those in direst straits while actually saving money overall.

6. Antitrust

The opposite of forming a monopoly is breaking one up: antitrust laws are meant to do exactly that. This can be a real cost to society — a monopoly can be coordinated in a valuable way that several smaller companies simply can’t — but it prevents runaway inequalities.

Now on to the two lose/lose slices:

7. Recession

When the stock market crashes, everyone loses, but the people who had the most lose the most. This is the polar opposite of Investment, where everyone gets better off but especially those who were well off to start with. However, while Investment is a relatively common positive outcome, much more common than Recession is…

8. Disaster

The opposite of Utopia: everyone is worse off, but especially those who were most vulnerable. Think of hurricanes obliterating whole cities, heat waves that overwhelm the elderly, pandemics that disproportionally affect the victims of structural racism.

Why a wheel?

So far these different types of outcomes have just been a list of eight types, and maybe you noticed that they come in four pairs of opposites. Why do I make them a wheel? Because each slice is most similar to its two neighbors on either side, differing from them only slightly:(This is my first animated graphic for this blog, and it is Not Awesome but I’m proud of it! Click here to see the original on Desmos.)

And it lets us see clearly which groups of outcomes have various good properties:

As you can see, the golden “Utopia” slice has every good feature, and the “Disaster” slice has none. Every other type of outcome will be good in some ways and bad in others, but that doesn’t mean those interventions are useless! Next time, we’ll look at how you can mix two types of outcomes to get a third, like mixing colors on a color wheel.

Till then, I’d love to hear from you if this helps illuminate what you do or don’t like about some policy ideas, or if there’s something you found confusing or wrong with my examples. (Some of them could definitely be placed into other slices depending on how you divide up society into two groups.) Let me know in the comments!


2 thoughts on “The Wheel of Outcomes

  1. Wow! Nice work on this post! And cool animation! I showed it to my brother and he asked if you could plot Andrew Yang’s policies for us with your pie chart. 🙂 Also, in terms of a quick visual, are the colors meant to indicate that the lighter the color, the better the policy?

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    1. Thank you! The colors are meant *roughly* to be arranged so that darker colors are worse and lighter ones are better, and so that redder colors (on the right) are toward the conservative end of the political spectrum and bluer colors (on the left) are more liberal. But this is not to say that any specific policy is bad because it doesn’t fall into the brightest wedge, or because it lands on the wrong side of the pie. If anything, I’m attempting to highlight how much overlap “maximize the total” and “minimize the difference” have as guiding philosophies.

      As for Andrew Yang’s policies, I think it would be best to consider them one at a time, and I’ll start with Universal Basic Income (UBI) because that’s the one I know the most about.

      UBI is a really interesting case to consider. If you just consider the effects of giving everyone, say $1000 a month regardless of whatever else they make, that’s good for everyone, but *especially* those with not very much already. Gold: Utopia!

      But it gets trickier if that income comes from tax money — then there must be some people who are paying more into the UBI scheme than the $1000 they get back from it. That puts the policy into the upper-left teal/blue quadrant, and to decide which you have to figure out whether the total benefit to those who receive the payments outweighs the total cost to those who pay for them. Then it depends on what metric you use to add up different people’s experience: Quality of life? I’m pretty sure it’ll help people a lot more than it will hurt the extremely rich who would be funding the UBI. (Safety Net!) What about total GDP: would the increased safety and flexibility granted by the UBI mean that our nation as a whole earns more than it would otherwise? I find that doubtful, and experiments in Finland make it sound like people tend to work about the same amount with UBI, or maybe a little less, so from that perspective this policy would land in Antitrust (which makes sense with the image of breaking up and distributing big piles of wealth).

      The main fear I hear from conservatives about UBI is that it will disincentivize everyone from working (the poor because they can fall back on “handouts”, and the rich because they don’t get as big bonuses), leading to everyone being worse off, if a little more equal — that would push the policy all the way into the purple “Recession” slice. I don’t find this narrative supported by the data: most people want to work even if they don’t strictly have to, because it is a way of adding meaning and purpose to their lives, but UBI allows people to also prioritize the types of work that don’t get counted in GDP, like personal growth or caring for family members.

      So I’d put UBI somewhere between teal and blue on the color wheel. If a society has a strong orange Investment streak, like ours does, then that can be just the trick to pull the direction more toward Utopia. (This kind of color-mixing is what the followup post will be about.)

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